How Much Do Realtors Make?
A few weeks ago, while relaxing on a bench in a park, a group of young men and women were engaged in a heated debate on the career prospects of real estate. One of them said that real estate was lucrative and one can make money very quickly.
He continued, “You only need to make a few calls to prospective buyers. One in five calls that you make will definitely buy the property that you are selling. This is something I can do, and get rich all within a short time.”
This is not the first time I am hearing this. I have met so many people with a similar outlook. Some even go to the extent of saying that real estate and brokers get paid for absolutely doing nothing. They use other people’s wealth to make money.
I wish it were this easy. If I had more time, I would have talked some sense to this man, show him what effort real estate and brokers put into earning the commissions that they take home. However, I did not have time as I was heading for a meeting with a client in the next thirty minutes. I could not miss this meeting as we were about to close on a deal and the client was also to going to give me a check on the same day.
This was my payday, how on earth could I miss it and listen to people who out of ignorance think that real estate agents earn money so quickly. I wish they knew what was involved: all the meetings that one has to attend, the haggling, research among other aspects in the process of selling.
One question that came out of that experience is: how much do realtors make to attract that kind of attention. Also, I was personally curious to find out what the public perceives realtors make.
In this article, I will attempt to answer these questions. I will do this with my own experience in mind. I would like the young man, who thought that we make easy money, to read my article, and get to understand what is truly involved in all this.
First, let’s be clear about what the agents earn. They are paid on commission. This is a percentage of the amount of the deal.
Normally, this commission is pegged at five to six percent of the sale price. The amount may look huge, especially when the property in question is pricey but when it is split between the agent and the broker, the amount goes down significantly.
For example, when selling a house worth $ 250,000, each takes home approximately $7,500. At times this amount is not just for one broker or agent, it may be shared among several of them. This means that the amount earned by prospective realtor reduces even more.
The amount earned by a given agent is the gross amount. It is subjected to several deductions. Taxes are also deducted from this amount among other levies. There are also expenses that a real estate agent incurred in the course of working on this deal. These expenses include professional fees, signs, advertising cost, rent, and other bills which are all needed to make this sales process successful.
So with these deductions, the amount that one takes home decreases. Another way of calculating the real estate earnings is when you take the whole amount and then get a figure for the entire year. This can be taken as the amount earned and then consider the deductions as regular expenses.
One problem with this method is that it may exaggerate the amount earned by the real estate agents, giving false hope to those who would like to join this career in the future.
Having said that, it is essential to know that amount earned by a given real estate agent will depend on several factors. The most obvious is the number of sales. The more sales one makes, the higher the earning.
Also, you have to consider the expenses that are incurred during the course of working on any given sale. The more costs you have, the lower your earnings.
The number of agents involved in the sale of a property will also reduce the amount taken home. When the amount is to be split among parties, the take-home commission reduces significantly depending on the number of people involved.
The Bureau of Labor Statistics estimates that on average real estate agents take home approximately $45,990 per year, but they also agree that this amount can significantly vary given the factors mentioned above. Some statistics indicate that one-tenth of the agents took home an average of $ 23,000 while ten percent of these earned a figure of $ 110,000 and above.
When you look at these figures, there is a significant disparity between the low and high earning real estate agents. Also, given the amount of time that one puts into their profession and when you factor the amount earned per hour, it can be even lower. Some agents are known to put in more than sixty hours a week. Research has shown that there is a correlation between the number of hours put into your real estate career and the income earned.
To sum it up, it is relatively hard to put a figure on how much money a real estate agent earns. There are many factors at play, but at the end of the day, it is up to you. The harder you work, the more money you will make.